President Trump has threated to impose at least US$50 billion of tariffs on Chinese goods due to alleged intellectual property theft and unfair trade practices. This could be the start of the trade war that many market commentators were worrying about a month ago. It’s impossible to know if this is just the start of a short-term problem or the cause of the beginning of the next recession, only time will tell. I think it’s important to remember Warren Buffett’s mantra when it comes to share market danger and volatility: Be fearful when others are greedy and greedy when…
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President Trump has threated to impose at least US$50 billion of tariffs on Chinese goods due to alleged intellectual property theft and unfair trade practices. This could be the start of the trade war that many market commentators were worrying about a month ago.
It’s impossible to know if this is just the start of a short-term problem or the cause of the beginning of the next recession, only time will tell.
I think it’s important to remember Warren Buffett’s mantra when it comes to share market danger and volatility: Be fearful when others are greedy and greedy when others are fearful. Markets fearing about trade wars seems like a good reason to log onto your stock broking website to me.
Of course, today may not be the ‘bottom’ of the price crash, so don’t use up all of your investing money on day one.
If the US is going to suffer, and it’s impossible to say which shares will suffer most, it might be best to take a very broad approach to buying, such as buying indexes.
Here are three options:
Vanguard US Total Market Shares Index ETF (ASX: VTS)
This index provides investors exposure essentially to the whole US stock market. It has a very low management fee of 0.04%, which is one of the lowest in Australia. It has over 3,600 positions, which is a very diverse portfolio.
Over the past five years it has returned an average of 20.76% per annum thanks to the growth of the US and global economy. Past performance is not an indicator of future performance, but it shows how strong the companies in this index are.
Indeed, its top holdings are Apple, Microsoft, Alphabet (Google), Amazon, Facebook, Berkshire Hathaway, JP Morgan Chase, Johnson & Johnson, Exxon Mobil and Bank of America.
iShares S&P 500 ETF (ASX: IVV)
This index is created by Standard & Poors to reflect some of America’s top businesses. It’s run by Blackrock and also has a very low management fee of 0.04%. Over the past five years it has returned an average of 21.11% per annum. Ironically, according to the Blackrock site this index had 505 positions on 21 March 2018.
Its top holdings are essentially identical to the Vanguard index, except Alphabet class A and class C shares are in the top 10, so Bank of America doesn’t make it into the biggest 10 positions.
BETANASDAQ ETF UNITS (ASX: NDQ)
This index gives investors exposure to all of the top American tech stocks that are listed on the NASDAQ. Some people may prefer this as an investment because the tech industry is likely to be the one that grows the most in the coming years. Technological improvement will always make the companies creating that development more valuable and profitable.
Its top holdings also include Apple, Facebook, Alphabet (Google) and so on, but more of the index’s weighting is dedicated to the big tech stocks.
All three of these indexes could be good long-term options to grow your portfolio. Today and the coming weeks could be a good opportunity to add shares at beaten-down prices to your portfolio. If I had to pick one it would be the NASDAQ index because I think the tech shares will be the long-term winners of all the industries.
If you want exciting Australian businesses ideas instead, you should read about these hot stocks.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.